Hotel Revenue Management in Times of Crisis

When the economy is good, the revenue management system can be likened to a well-maintained and regularly used car engine. However, during lean times, a lot of things change and hotel revenue management is suddenly seen as a low-priority activity. Though the reason behind this concept is understandable, it is actually a mistake. Sure, revenue management systems are especially suitable for managing bookings and maximizing revenues but not giving priority to this area during the bad times can have long-term consequences.

The lean season is the time when revenue managers should look at their systems and methods. The data gathered can help them manage hotel rates, customer mix, and promotional strategies in the future. If property managed, the hotel can rely on RM processes to enable effective marking, sales, and pricing decisions in today’s economy. Industry estimates reveal that 4-12% of RevPAR improvements are possible if more effective RM methods are implemented.

RevPAR should never be ignored because it can easily translate to double-digit hotel sales growth. Below are some areas that hotel revenue managers should focus on:

Be Proactive in Forecasting Booking Demand

Majority of RM systems combine historical data with the latest trend in the market to create their forecast. But because of the unique situation of the economic downturn, market behavior becomes volatile. The data from the previous years is no longer relevant and it cannot be used as a gauge to predict performance. Weighing the importance of the latest trends against historical data is appropriate in this case. Having an up-to-date demand forecast will enable the hotel to become more responsive to the needs of their target customers.

Update Hotel Revenue Optimization Polices to Reflect Market Conditions

Even during economic downturns, there will still be pockets of demand and opportunities that lies underneath the surface. The hotel revenue manager should find out where these opportunities lie and make appropriate changes to the policies of the establishment. To identify this potential, it is important to look into demand segments that are performing better compared to the average. This revelation will reveal many things about the hospitality industry including the price range, promotions, and the services that people are willing to go for even during bad economic conditions. It is critical to thoroughly review the hotel policies before important decisions are made. For example, restrictive policies that worked the previous years should be lifted to fill up the empty rooms.